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Establish a level playing field for Workers' Comp or get blindsided by high premiums

By James Kerin

"The highest paid player on an NFL team is the quarterback. The second highest paid player is the left tackle, because the left tackle's job is to protect the quarterback from what he can't see coming."

This is the opening monologue of the film, "The Blind Side," albeit slightly paraphrased. And what that quarterback can't see coming is pretty much the same for employers. For the QB, the blow comes courtesy of a 300-lb linebacker. For the employer, the hit that could clobber a business comes from escalating workers' compensation costs.

But there are ways to create a level playing field (and maybe even a home-field advantage) and it involves a multi-pronged procedure to control those costs, that starts with pre-employment physicals to prevent hiring losses before they occur.

I have worked with clients that were plagued with prior losses because they hired people with pre-existing conditions, i.e., bad backs, bad knees. These employees were an injury time bomb waiting to go off and the medical payments were much higher than necessary because of pre-existing conditions. So the key to help level the playing field is to have a post-offer, pre-employment physical, and have a physician knowledgeable in occupational medicine interview the prospective employee.

When employees are injured, you also want to get them back to work as quickly as possible because an effective return-to-work program will stop the payout of a claim. Return-to-work can run the gamut from bringing them in to do lighter office work, to being a helper on a project. Maybe instead of hoisting 75-lb boxes into a delivery van, they are driving the delivery van. When you have an employee returning to work and paid on a limited-duty basis, it reduces the amount of money the carrier pays on the indemnity side of a claim, or more precisely, what it pays for lost wages. So the faster the employee is back on the job, the sooner you will limit both the claim and the amount that the insurance company pays or holds against the claim and reserve.

An HVAC company that we do business with on Long Island had a severely overweight employee get injured. It was determined that the conditions were pre-existing, enabling us to get some of the claim reduced through a second injury fund. Then he returned to work as a dispatcher, which meant he wasn't vulnerable to a second occurrence of the same injury. This allowed us to both reduce the immediate loss of wages that were being paid and the amount of time they were going to be paid, thus lowering the total payout. This action took the company's reserve from almost $180,000 down to approximately $80,000.

Once a claim has taken place it's imperative to work with the insurance company to make sure the case is not overcharged from a cost standpoint and that the reserves are properly managed. This is paramount because the employer's reserves have a major impact on the cost of the policy.

As a business owner, you are hemorrhaging money unless you understand the rules of the game. And one of these is the ins-and-outs of the premium audit. This means you need to have your payroll records easily understandable, be able to explain to an auditor in 25 words or less what you do, where you do it, and how you do it, and segregate the duties of your employees so the premium calculations are appropriate, and you're not being overcharged.

The premium audit process can also work to your advantage as you may be entitled to credits. In New York there are premium adjustment credits that can be applied. For instance, in the New York Construction Classification Program, there is a calculation that's done on one form based upon your payroll records, which can give you a credit, based on your average hourly wages. This is designed to set up a level playing field between higher pay-level employers, i.e., union and non-union businesses, and prevailing wage because the unions pay a higher wage per hour. This allows contractors with higher average hourly wages not to pay inflated premiums where no additional exposure exists.

If you take the steps outlined here, you will no longer feel like you are on the ground end of a seesaw, looking up at a workers' compensation system with all the cards stacked in its favor. And once the field is level, you'll never be blindsided by high costs again.

James Kerin, MWCA, CWCA, CPCU is the CEO of Millenium Alliance Group, LLC, based in Sysosset, NY. He is a Certified WorkComp Advisor (CWCA) and a 40-year veteran of the insurance industry.